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Wednesday, 24 September 2008
Page: 5498

Senator POLLEY (2:32 PM) —My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Can the minister update the Senate on the current global market situation and how the government and Australia’s independent regulators are responding to these major events?

Senator SHERRY (Minister for Superannuation and Corporate Law) —Thank you to Senator Polly for her question. As I am sure those in the chamber would be aware, I have from time to time provided some regular updates about events in our global markets that have been very fast moving. Indeed, there is a change every 24 hours given the current circumstances of the US subprime meltdown and the financial crisis that has impacted right around the world.

In recent times, several large, brand name US investment banks have disappeared or have been swallowed up, and the investment model on which they operate has been discredited. The US banking system and the financial system are in very poor shape, and the upheaval has been causing havoc on world financial markets, particularly stock markets. We operate in a global financial economy. Unfortunately we are not immune to these impacts in Australia, as we have seen with the lack of stability on our stock market in particular.

But it is fair to say that we are weathering the storm better than most of our comparable peers, and particularly the United States. In the IMF article IV report card on Australia released this year, which my colleague Senator Conroy referred to earlier, our strengths are set out very clearly. The IMF said that Australia’s strength is the result of responsible economic management. The report said:

Looking ahead, Directors considered that the sound macroeconomic framework should permit Australia to weather the global downturn and contain inflationary pressures.

The IMF also confirmed that our ‘banking sector is sound with stable profits, high capitalisation and few nonperforming loans’. The report said that Australian banks have weathered the global financial turmoil reasonably well and that the four large banks that account for two-thirds of bank assets continued to report strong profits through early 2008, together with adequate capital. This is of course in stark contrast to many banks in the United States. The IMF has also commended the Labor government on the long-term reform agenda. It concluded that its successful implementation will improve the economy’s flexibility and expand its productive capacity. The Labor government welcome the IMF’s assessment, but we are not resting on our laurels. We on this side of the chamber understand the need for responsible economic management in times of heightened global uncertainty.

I would like to take this opportunity to inform the Senate of another example of this government taking action to protect and strengthen our financial markets in these uncertain times. Yesterday I released the draft of the Corporations Amendment (Short Selling) Bill 2008. The bill is being released and is intended to establish a comprehensive disclosure regime for covered short selling. Should our independent regulator—

Senator Abetz —Yes, funny that!

Senator SHERRY —The amendment will actually amend the Corporations Act 2001, which was passed by the previous government. Unfortunately, the previous Liberal government left a gap when it came to the disclosure of covered short selling. Unfortunately, this has become a matter of major importance given current events on the markets. So, as I have said on many occasions, despite the ill-informed views of the opposition and the ill-informed interjections that we have just heard from Senator Abetz, the government has no intention of putting in place a permanent legislative ban on— (Time expired)

Senator POLLEY —Mr President, I ask a supplementary question. Can the minister inform the Senate of any ongoing alternative approaches to dealing with these globally critical issues?

Senator SHERRY (Minister for Superannuation and Corporate Law) —As I have said, this government intends to correct the gap and close it in respect of the disclosure of covered short selling and the Corporations Act 2001. It is a very important change in terms of disclosure in the context of current markets. What we do need to see also from the Liberal opposition, particularly during these uncertain financial times, is a responsible approach to the budget. They should cease their raid on the budget. We need a healthy budget surplus in these uncertain financial times. We need an important buffer, an important cushion, in these uncertain financial times. The Liberal opposition should stop attacking our budget and should stop criticising the independent financial regulator, ASIC, in respect of the actions it has taken—an independent regulator that they created with commissioners that they appointed and with powers that they gave to their independent regulator. (Time expired)